Britain hopes to raise $5 billion in privatisation of Royal Mail postal service

Thu 12 Sep 2013, 10:39 PM AEST

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Britain will privatise most of its 500-year-old postal service.

Reuters: Darren Staples

Britain has embarked on its largest privatisation in decades as the government unveiled plans to sell the majority of the near 500-year-old, state-owned Royal Mail postal service.

The department for business said a stock market flotation would take place in the coming weeks, giving the public a chance to buy into the postal network.

Ten per cent of the shares will be given to Royal Mail staff.

It said the size of the sale would depend on market conditions, but analysts suggested the flotation could value Royal Mail - which traces its roots to a service founded by King Henry VIII in 1516 - at $3-5 billion.

The government said it would ensure value for money for British taxpayers.

Business minister Michael Fallon, the man leading the sale, had said in July there was healthy demand from domestic and overseas investors in Royal Mail.

The company, which no longer includes the Post Office services and retail business, has revenue of more than $15 billion and more than doubled profit in the year ended March 31, helped by a greater focus on parcels, which make up almost half its turnover.

The privatisation of Royal Mail, which has about 150,000 staff, is designed to raise funds to help finance the modernisation of the postal operator's business.

It will be the fourth time the group has tried to go public.

Three attempts failed in the past 19 years - all due to opposition from within the governing majority, which feared an electoral backlash from tampering with a revered institution whose red post boxes are known around the world.

Essential mail services 'protected by law'

The flotation plans could take place against a backdrop of strike action, with unions concerned about threats to jobs, pay and the possible impact on services.

The Communication Workers Union, which represents most of the delivery service's staff, will send out strike ballot papers next week if an agreement cannot be reached with Royal Mail over post-privatisation pay.

Mr Fallon said the time was right to go to the capital markets despite the threat of strikes.

He said there were always concerns with any privatisation among the workforce and from the people who relied on that organisation's service, but he said Royal Mail's services would continue.

"The six-day-a-week service that we all rely on and that businesses rely on, that is absolutely protected and it is protected in law and there is going to be no change to that," Mr Fallon told BBC radio.